Affiliated Managers Group Q2 2026 Earnings Call

Greetings and welcome to the AMG Second quarter 2026 Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Patricia Figueroa, Head of Investor Relations. Please go ahead.

Good morning, and thank you for joining us today to discuss AMG results for the second quarter of 2026. Before we begin, I'd like to remind you that during this call, we may make a number of forward looking statements which could differ from our actual results materially due to a number of factors, including those described in today's earnings press release and our most recent form 10-K, and subsequent filings with the SEC. And AMG assumes no obligation to update these statements. Also, please note that nothing on this call constitutes an offer of any products, investment vehicles, or services of any AMG affiliate. A replay of today's call will be available on the Investor Relations section of our website, along with a copy of our earnings release and reconciliations of non-GAAP financial measures, including any earnings guidance provided. In addition, we have posted an updated investor presentation to our website and encourage investors to consult our site regularly for updated information With us today to discuss the company's results for the quarter are. Jay. Horgen, president and Chief Executive Officer and Dava Ritchie, chief Financial Officer. With that, I'll turn the call over to Jay.

Thanks, Patricia, and good morning, everyone. Today. AMG reported another quarter of record results. Including the highest second quarter earnings in our company's history. Adjusted EBITDA of approximately 316 million. And economic earnings per share of $8.29 grew 44% and 54% year over year, respectively, reflecting the strength of our diversified business and the ongoing execution of our strategy. Assets under management increased to a record $942 billion, driven by net inflows and markets and. Setting the stage for ongoing earnings growth momentum in the second half of 2026. We. Due to generate strong organic growth with $13 billion in net inflows in the quarter and $56 billion in net inflows over the last 12 months. Importantly, these figures understate the exceptional momentum in higher fee. Higher margin alternative strategies, which attracted 29 billion in net flows in the quarter. And approximately 100 billion over the past 12 months. Given this significant growth and our increasingly attractive business profile, we continue to repurchase shares at an elevated pace, deploying approximately 189 million towards repurchases in the quarter and approximately 375 million in the first half of 2026. The momentum across our business highlights the successful execution of our strategy and is a result of the ongoing evolution of our earnings profile towards alternatives.

Today, alternatives account for more than 60% of our earnings, and this contribution is expected to grow meaningfully over the next 12 months. As we have discussed in prior calls for secular trends continue to drive our organic growth profile. First. The accelerating client demand worldwide for secondary strategies across private markets. Second. The ongoing client demand for infrastructure strategies broadly. Third, the growing demand for absolute return strategies within client portfolios and. Fourth, the continued expansion of tax aware investing. Together, these four growth areas. Secondary solutions. Infrastructure. Absolute return strategies and tax aware strategies have been the driving force behind the 100 billion in net inflows into our affiliates. Alternative strategies over the past 12 months. Looking ahead. We expect ongoing strength in alternative strategies as clients increasingly seek differentiated sources of return and diversification against the backdrop of a more complex market environment. With five consecutive quarters of alternative lead net inflows so far. And increasing exposure to structural growth areas. AMG. Is well positioned for sustained organic growth in earnings momentum. More broadly, over the last 12 months Our assets under management have increased by approximately 171 billion, or 22%, including $69 billion. As a result of new affiliate investments.

Following an active first half, including the completion of our investments in BBH Credit Partners, Highbrook investors and an incremental minority investment in Gata Capital Partners Our pipeline remains strong. In the. Second quarter. We saw a notable increase in new investment opportunities in. Cluding a number of high quality independent firms managing alternative strategies and. That trend has continued into the third quarter. We are excited to execute on this. Expanded opportunity set. And we see meaningful potential to form new partnerships that further diversify our business and drive earnings growth. Our reputation as a strategic partner that can magnify the competitive advantages of independent firms while preserving their independence. Continues to distinguish AMG in the marketplace. No other institutional partner can match our 30 plus year track record in meeting the needs of, and magnifying the opportunities for independent firms, which is why AMG is unique approach continues to strongly resonate with prospective affiliates. And give. Horgen. Our competitive differentiation. Our robust capital position and our strong pipeline of new prospects. We have a. Sizable opportunity to drive additional earnings growth and further evolve our business profile through new investments. AMG business is highly diversified across 40 affiliates operating in private markets.

Liquid alternatives and differentiated long only strategies. This. Unique business profile. Generates significant unencumbered cash flow, enabling us to navigate periods of uncertainty and changing market conditions while also. Making accretive investments in new and existing affiliates. In addition, given our forward growth prospects and the strength of our capital position, we have been a buyer of AMG shares in size. Repurchasing more. Than 10% of the company's shares outstanding in the last 12 months. And nearly 25% since the beginning of 2024. And we expect to continue to take advantage of this opportunity, especially during periods of dislocation in our share price. Our attractive business profile and our ability to invest substantial capital in the areas of highest growth and return across new and existing affiliates, and share repurchases, provides us with the opportunity to continue to generate a long term compound annual growth rate in economic earnings per share of between 15% and 20%, as we have done over the past five years. And given the ongoing successful execution of our strategy, that growth rate has accelerated in. 2025, we generated growth in economic earnings per share of more than 20% and. We expect that growth rate to be approximately 40% in 2026.

As we look ahead. Our capital allocation decision making will continue to be by far the most impactful element of our strategy. We expect our cumulative free cash flow over the next 5 to 7 years to approximate our entire current market capitalization. Enabling us to continue to deliberately evolve AMG's business towards areas of growth in our industry. And with our unique partnership centric, cash generative, return focused model. We will continue to deploy that capital with discipline. Further diversifying and enhancing our earnings power and our ability to create long term value for shareholders And with that, I'll turn it over to Dava.

Thank you. Jay. And good morning, everyone. In the second quarter, AMG's business momentum continued to increase, supported by strong organic growth record assets under management and accelerating year over year earnings growth, which have together resulted in record cash flow generation in 2026. Our results underscore the benefits of our diversified affiliate model. The positive impact of our strategic focus on areas of secular growth and the cumulative impact of our disciplined capital allocation decisions As we look ahead to the second half of the year. We see ongoing organic growth momentum at our affiliates managing alternative strategies. And given our strong balance sheet and record cash flow, we expect to continue to deploy capital in ways that support long term EBITDA growth and shareholder value creation. Including through growth, investments in new and existing affiliates, and return of capital through repurchases. Starting with our results for the second quarter. AMG's AUM ended the quarter at $942 billion. The highest level in our history, representing a 7% increase from the prior quarter. Investment. Contributed 6% to AUM. Growth, driven by strong equity market gains and net inflows, representing 1.5% of beginning AUM. On an. LTM basis, our AUM grew 22%, driven by the addition of new affiliates, positive investment performance and record net inflows for our alternative affiliates.

Over the. Same period, our fee related earnings, which exclude net performance fees and catch up fees, grew 39%, representing a growing contribution to EBITDA Further enhancing the earnings quality of our business. Overall, these results highlight the scale and diversity of our business and the ongoing successful execution of our growth strategy. Turning to flows and. Affiliates generated net inflows of $13 billion in Q2. This headline result understates the strength of the underlying flow profile and alternative strategies, which generated a record $29 billion of net inflows in the quarter as well as the positive impact of those flows on our earnings profile. Over the last 12 months. Our organic growth has had an outsized impact on our EBITDA growth rate as net inflows in alternatives have enhanced our overall fee rate and margin profile. Within alternatives, we delivered another quarter of record breaking flows, including a rising contribution from private markets, fundraising over the last 12 months. Net inflows in the category were approximately 100 billion, driven by the four key themes that Jay discussed, including secondaries, infrastructure. Absolute return and tax aware investing. This flow profile further illustrates the positive impact of our evolving business mix, as AMG exposure continue to shift towards higher growth alternatives.

Building an even more durable foundation for organic growth and cash flow generation over time. Our private market affiliates raised $8 billion in the quarter, driven by a diverse set of affiliates, primarily in infrastructure, secondaries, and specialized areas where our affiliates have deep expertise. Institutional demand for our private market strategies remains strong. Supported by durable client demand trends. Fundraising. Activity was broadly distributed across multiple affiliates. Strategies, vintages, and channels. Illustrating the differentiated and diversified nature of AMG's private market offerings. In liquid Alternatives, our affiliates generated $21 billion in net inflows in the quarter, with contributions from several affiliates. Net. Inflows were positive across client channels, with $16 billion of net inflows from wealth clients into tax aware strategies, along with 5 billion of combined net inflows from institutional and retail clients across both absolute return and beta sensitive strategies. The quarter highlighted the breadth of demand for our affiliates liquid alternative capabilities as institutional and individual investors continue to allocate to strategies that can complement traditional portfolios through diversification, liquidity and less correlated return streams across market environments. Our differentiated long only equity strategies saw net outflows of 14 billion, but we expect flows in this areas to improve over the medium to long term, consistent with the generally improving trend.

We have seen in recent quarters. And as the overall earnings contribution of these affiliates within our broader business has decreased to 35%. In multi-asset and fixed income, net outflows of 2 billion were largely driven by seasonal outflows from money market and short duration. Fixed income funds. We expect flows in this category to normalize to historical levels of modestly net positive organic growth, but we may experience second quarter seasonality on a forward basis, given the increased exposure to wealth clients from the addition of BBH Credit Partners this year. Overall, the quarter's flows highlight the benefits of our evolving business mix and the growing contribution of alternatives to our organic growth and earnings over time. Turning to second quarter financial results. We reported adjusted EBITDA of 316 million, which grew 44% year over year. Few related. Earnings, which exclude net performance fees and catch up fees, grew 39% year over year, driven by positive organic growth, investment performance and margin expansion. At some of our largest affiliates. Net performance fee earnings of $10 million in the second quarter were at the high end of our guidance range, and increased $5 million from the prior year period In addition, we reported incremental fees of approximately $7 million, primarily related to catch up fees at private market affiliates.

Economic earnings per share of $8.29 grew 54% year over year. Driven by these factors and the impact of share repurchases, which have reduced our average economic share count by more than 10% from the prior year period. Now. Moving to third quarter guidance, we expect adjusted EBITDA to be in the range of $315 million to $325 million, based on current AUM levels, reflecting our market blend, which was down 2% quarter to date. As of July 29th. This includes recurring fee related earnings of $315 million, up from $299 million in Q2, and no material private market catch up fees and net performance fees of up to 10 million, based on this, and assuming an adjusted weighted average share count of 26.3 million, we expect third quarter economic earnings per share to be between $8.43 and $8.71. The midpoint of which represents approximately 40% growth versus Q3 2025. Finally, turning to the balance sheet and capital allocation, we. Issued to repurchase at an elevated rate with approximately $189 million in shares in the second quarter. Bringing year to date repurchases to 375 million for. The full year, we expect to repurchase approximately 600 million, subject to market conditions and capital allocation activity. Our year to. Date repurchases of 375 million.

Together with the retirement of our junior Convertible trust Preferred securities in January. A portion of which effectively acted as incremental repurchases have reduced our economic share count by 1.8 million shares since the beginning of the year. In addition, with the completion of our investments in Garda and Highbrook in February. We have allocated nearly $800 million of capital in the first six months of the year towards growth, investments and capital return. As we enter the second half of the year, we continue to see an active pipeline of attractive opportunities to deploy capital in support of long term growth. Our balance sheet remains in a strong position given our long dated debt, low leverage and access to our revolver. We recently extended the maturity of our 1.25 billion revolver to June 2031, with enhanced pricing and covenant terms. Our balance sheet is further supported by a healthy underlying business, generating recurring and growing annual cash flow of approximately 1 billion on an after tax basis and ongoing access to capital markets. As Jay mentioned, we are seeing increased early stage new investment activity, and our balance sheet is well positioned to execute against that active pipeline while also repurchasing shares. Our second quarter results reflect both the continued momentum in our business and the advantages of AMG's affiliate model Looking ahead, we remain focused on executing our strategy, evolving our mix towards higher growth areas, investing selectively in growth opportunities with new and existing affiliates, and returning capital to shareholders with a strong balance sheet, growing cash flow generation and a disciplined approach to capital allocation.

We are confident in our ability to generate durable earnings growth and compound shareholder value over time. Now, we are happy to take your questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. Please. Limit yourself to one question. You may press star two if you would like to remove your question from the queue for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. In. Our first question will come from Bill Katz with TD Cowen.

Okay, thank you very much. Good morning everybody. Appreciate you taking the question. Thank you for the updated financial guidance. It looks very impressive., so Jay question for you., appreciate the broad nature of the flows. You mentioned a few things. Secondaries, Ars infrastructure and tax aware. I think most investors are probably focusing on the tax aware side of the equation., so maybe there how do you feel about the sustainability of that? You did speak to pretty broad flow contribution. There's been a lot of scrutiny on that of late ., and then maybe the broader question underneath that is, how do you think about liquid oils outlook at large as well? Thank you.

Yeah. Thanks, Bill. And good morning. Well. Let me start with context here. And focus on tax aware. And then more broadly liquid alternatives. so let me start by just commenting on the broader industry trend. As we've discussed in various settings over the past couple of years. Now. We believe that tax aware investing, it represents a structural mindset shift in individual investor behavior. And we also see this as a long term secular trend that continues to strengthen. And the evolution of it is really impacting the entire wealth management ecosystem. So this is not a phenomenon that's driven by a single firm or a single product. We see it as a durable change across the entire industry. At its core. You know, the underlying drivers, will they make sense because. Unlike tax exempt institutional investors, individual investors have to fund their daily lives with after tax dollars. So as a result, if an individual's investment objective is to grow, its after tax savings. Then managers and advisors, they should at least take tax consequences into account when making their allocation decisions. And this trend extends beyond liquid markets. It's evident in ETFs. It's evident in traditional tax loss harvesting strategies.

It's evident in long short equity approaches. And frankly, across a whole bunch of different asset classes, including private markets. You know, we see it in real estate, which has long been a tax advantaged investment category for individuals and even private equity firms. They're expanding their offerings to, you know, through. Through structures and products designed to help investors compound wealth more efficiently on an after tax basis. We see. The effects of this shift visible throughout the marketplace. A large number of asset managers have either introduced or about to introduce tax aware strategies. And you can see that reflected across the industry dialogue on this topic. Now, from our perspective. We're experiencing this trend most directly through AQR, but we're also seeing a growing interest in our affiliates operating in real estate infrastructure and energy transition, where the underlying strategies they possess, inherent tax advantages and our tax efficient for individuals. So. You know, maybe to get more specific in answering your question at the AMG level, these